Kuala lumpur: Bank Negara Malaysia’s (BNM) Monetary Policy Committee (MPC) has reduced the Overnight Policy Rate (OPR) by 25 basis points to 2.75 percent today. BNM stated that the ceiling and floor rates of the OPR corridor are correspondingly reduced to three percent and 2.5 percent, respectively.
According to BERNAMA News Agency, the latest indicators suggest continued expansion in global growth, driven by sustained consumer spending and some front-loading activities. The global growth outlook appears supported by positive labor market conditions, less restrictive monetary policy, and fiscal stimulus.
BNM last maintained the OPR at 2.75 percent in March 2023, later increasing it to three percent in May 2023. The central bank noted uncertainties surrounding tariff developments, geopolitical tensions, and commodity prices are impacting the outlook, leading to greater volatility in global financial markets.
For Malaysia, recent developments indicate continued growth in economic activity in the second quarter, supported by sustained domestic demand and export growth. BNM highlighted resilient domestic demand growth, employment and wage growth, particularly in domestic-oriented sectors, and income-related policy measures as factors supporting household spending.
The expansion in investment activity is expected to be sustained by the progress of multi-year projects in both private and public sectors, high realisation of approved investments, and ongoing catalytic initiatives under the national master plans. Favorable trade negotiation outcomes, pro-growth policies in major economies, demand for electrical and electronic goods, and robust tourism activity could enhance Malaysia’s export prospects.
However, the balance of risks to the growth outlook remains tilted to the downside, primarily due to slower global trade, weaker sentiment, and lower-than-expected commodity production. Malaysia’s headline and core inflation averaged 1.4 percent and 1.9 percent in the first five months of the year, respectively. Inflation in 2025 is expected to remain moderate amid contained global cost conditions and the absence of excessive domestic demand pressures.
BNM mentioned that inflationary pressure from global commodity prices is expected to remain limited, contributing to moderate domestic cost conditions. The impact of announced and upcoming domestic policy reforms on inflation is anticipated to be contained.
The performance of the ringgit will continue to be primarily driven by external factors. Malaysia’s favorable economic prospects and domestic structural reforms, along with initiatives to encourage flows, will provide enduring support to the ringgit. While the domestic economy is strong, uncertainties surrounding external developments could affect Malaysia’s growth prospects.
BNM emphasized that the reduction in the OPR is a pre-emptive measure to preserve Malaysia’s steady growth path amid moderate inflation prospects. The MPC will remain vigilant to ongoing developments and assess the balance of risks surrounding the outlook for domestic growth and inflation.